Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the LANXESS conference call. I would now like to turn the conference over to André Simon, head of investor relations. Please go ahead.
Thank you very much, Judith, and a warm welcome to everybody on the phone and to our Q2 conference call from my end here in Cologne. As always, I have with me our CEO, Matthias Zachert, and our CFO, Michael Pontzen. Please take notice of our safe harbor statements. With that, I am happy to hand over to Matthias for a brief presentation, and afterwards, as always, the Q&A. Matthias, please go ahead.
Thank you so much, and welcome from my side. I will jump into the presentation directly. Page four, and brief comments on the key highlights for second quarter. All in all, we see that volumes are back on pre-COVID levels earlier than expected. Clearly, I have to change my view here compared to where we saw the markets at the beginning of the year. This is positive. We see a strong recovery in the divisions that were heavily impacted in Q2 last year.
Especially as far as additives is concerned and engineering materials profitability are clearly strongly rising because they had seen sharp drops last year. As far as EBITDA is concerned, we are nearly back to 2019 levels with EUR 277. This is, of course, an increase of around about 24%.
It could have been more had shipping not been a constraint to us, especially as far as cross-ocean shipments were concerned, hey, this is something that is going to normalize in the quarters to come, even though for the second half of the year, shipments will still be a rare good. As far as M&A is concerned, we were active on both sides of the M&A markets. One on the divestment side. We closed the organic leather chemicals in Q2 and collected the proceeds. As far as Emerald is concerned, we went out last week on third of August, closed the transaction, and I welcomed immediately our new LANXESS team members, around about 500 chemical experts. Had a town hall with all of them globally.
On Friday last week, I had a one-hour session with the newly formed management team, all clear chemical experts, pros and positive vibrations. I felt good afterwards, and I hope they felt even stronger as well. Focusing on organic investments, we opened up an R&D development center, APAC, in the Shanghai area, so-called SCIP Chemical Park, one of the best chemical parks in China, but one of the most modern parks also internationally.
All in all, I think it was an active second quarter with sound financials or improving financials and sound moves on the strategic side. Page five. Let's move there. We give the cornerstones financially on the Emerald transaction. This is how 2020 was. Just a heads up for you guys in order to update your model accurately. This is a business, truly specialty, a very nice fit with the products in our Consumer Protection segment.
Around about EUR 80 million EBITDA was last year. We will bring this business in the three years to come to something like 22, 25%. This is at least what is embedded in our business plan. We consider here the business to develop nicely. Of course, it will be work that has to be done. Moving now to page number 6, shows you how we integrate the business in our portfolio. Basically, as far as the consumer specialties are concerned, the preservatives, animal health products, flavor and fragrances. We bundle this business also with the ingredients that we have in intermediates for flavor and fragrances. That will be bundled together and we will form on the basis of this, I would say, the leading player worldwide on benzyl products with a chemistry of benzyl or toluene chlorination, toluene oxidation.
We are world scale with five plants here across the globe. This is unique. Of course, for this uniqueness, we see the prime businesses on the F&F industry clearly is our biggest customers, combined with the beverage industry that we also supply to. This is going to be a strong business going forward, and it fits very nicely as a new business unit into our division, Consumer Protection. As far as the Polymer Additives are concerned, this is a business branded with the name K-FLEX that fits well to our Mesamoll products and plasticizers, plasticizer additives. We have here substantial sales muscle since the parts of Emeralds that have this end industry exposure are going to be added to our Polymer Additives division and of course, here under one of the biggest sales muscle that exists in the industry.
Leading to, of course, most likely good top line synergies going forward. A glance on page 7 shows you that we make our strides in the direction of further upgrading our recognition and award list and rankings as far as ESG is concerned. I know MSCI is very high on your radar, and here getting a double upgrade within 12 months speaks for itself. We are now in the double A ranking, which I would say is a further nice recognition next to the platinum upgrades we got by EcoVadis.
Also, this is a rating that is known. I like platinum and more of this hopefully to come. Page eight. A quick update on guidance. Despite all the uncertainties that persist on geopolitical issue that still are out there on the pandemic, we are looking positively into the second half of this year.
We think that industries will continue to be on a good momentum. Basically, all of our industries are improving, some not as quickly as others, like aviation. I think this will still take time. All in all, the businesses and end industries are moving in the right direction. Of course, some regions are going to stabilize. I think we had a very strong rebound in Asia already last year in the second half, and therefore growth definitely is going to be softer there. I assume that in Europe, this will still be a good market environment growth-wise, also in the second half of this year, then Q4 most likely also with softer growth rates. All in all, business environment seems to be healthy.
As far as LANXESS is concerned, in light of the organic development of the business, but also due to the inclusion of Emerald Kalama business, we up our guidance to EUR 1 billion and to EUR 1,050,000,000. This is what we see as of today. With this, we would love to open up the call for all of your questions.
The first question is from Christian Faitz, Kepler Cheuvreux. Your line is now open.
Yes. Thank you. Good afternoon, everybody. I have two questions maybe. First on logistics. Can you please give us an idea by how much percentage points or basis points the higher logistic costs ate into your group margins and which segment was the most affected? How do you see logistic costs evolving throughout the remainder of this year? Will you also push through higher pricing to compensate for the higher logistical costs? Second question, a very simple one. How do you see working capital evolving for the remainder of this year? Thank you.
Of course. Thank you for your question, Christian Faitz. We will tackle them one by one, and Michael will take working capital, which obviously follows our seasonality. I will take up logistics. On logistics, we have seen now in second quarter a EUR high single-digit million incremental impact. Partly this could be absorbed, partly it is still outstanding. We have to massage that into our pricing going forward. That should clarify the impact here on financials. It's definitely a drag.
Not a huge one, but it's a visible one. Second, however, is the delay in shipments that we, for instance, faced from U.S. to Europe, U.S. to China. China definitely was a constraint, as you have seen in the press. It was completely stocked in some of the harbors, congestions everywhere.
I've not seen that so far as heavily as we currently see, and that's impacting everybody, not only us. Very clearly, I spoke to one of the CEOs of the big European transportation companies that have massive container capacity. He clearly indicated to me, this is going to be a topic for the next six to nine months, because new capacities will only come within 2022 and 2023. For the remainder of the year, it will be a drag. I mean, we worked on this internally.
Fortunately, our company has reserved close to 100% of our expected volumes. We basically have capacities reserved. Even when you have capacity reserved, you sometimes face one to two months shipments delay. That's basically the situation on logistics, and Michael will hammer out the answers on working capital. Come on, Michael.
Hi, Christian, as well, hi, everybody from my side. Thanks for the question, and you're touching a point when looking in the cash flow statement, which obviously is an eye-catcher, but unfortunately to the negative, at least for the time being. As you all know, we do have this typical seasonality throughout the year that in normal years, like in 2021, for example, we have the increase in working capital in the first couple of quarters, and then the stabilization in the third, and then the release of cash in the fourth quarter. At this point in time, I do not see a reason why this usual pattern should be different this year. It was, of course, different last year, and that is the major deviation which you find in our cash flow statement.
If you look last year, we were able in the second quarter, given the circumstances, to release around EUR 56 million, and this year we had to spend EUR 165 million. If you deduct these numbers from the operating cash flow line, you will recognize that we had a rather good operating cash flow in the second quarter. In fact, it was the best operating cash flow pre-working capital changes in the past four years.
The focus on our side is clearly as well on generating cash, but the pronounced development in the working capital in the second quarter was even, let's say, overpronounced because there were three, four, let's say, additional effects next to the obviously highly sharping, rising raw material prices, which did obviously have an effect on the inventories and on the receivables.
On the receivables as well, we were in a position to record for a very strong month of June, which in fact then leads to a relatively high number of receivables at the end of June. The third and fourth element, and that is the usual seasonality, is the preparation for turnarounds, which you usually see in the second half of the year. Finally, Matthias was referring to it, some shortage of shipments, which did have as well a small impact on the volume. To cut a long story short, there should be the usual seasonality in place this year.
Wow, that was a long answer. I hope that clarifies everything.
Yes.
Let's move on.
Thank you, Matthias. Thank you, Michael.
Most welcome.
The next question is from Matthew Yates, Bank of America. Your line is now open.
Hi. Afternoon, everyone. A couple of questions. The 1st, I think you've raised the guidance for your exceptional items this year by about EUR 50 million. I guess some of that relates to the Emerald deal, but can you disaggregate the moving parts in that, particularly if it's anything relating to IT spend, for example, why your assumptions now are different versus earlier in the year? The second question is around your Lithium project. I know there's still a lot of work here being done to evaluate and get all the answers before sanctioning. I just had a question around the structure of the project. It potentially is a very sizable CapEx investment for the group.
I'm just wondering what sort of equity share you feel comfortable with in order to capture the long-term potential profit opportunity here, but also manage the shorter-term execution risk on what is potentially quite a complex and unproven project. Thank you.
Matthew, good to hear your voice. Michael will address exceptionals, and I will pick up Lithium. On Lithium, in light of the fact that Standard Lithium is now also listed at the NASDAQ stock exchange, of course, we have to be very humble on making any statements relating to other companies. This is at least the legal advice. I will share what can be legally shared. The structure on the joint venture we've explained already in our Capital Markets Day events in November 2019. The equity share in this joint venture will be according to the underlying understanding of both parties between 60% and 70%. It is the working assumption as we speak. Of course, we would only inject money once proof of concept from our perspective is fully there in all aspects.
Lastly, what I would like to say is, of course, we are advancing now more and more, not at the speeds of light yet, but we are advancing in the positive direction. Once we have new information that is worth sharing, we will share it, of course, with our investor base as well. Michael, please explain and give transparency to exceptionals.
Hey, Matthew. Thanks for the question. There are two major driver, which are basically hit one-off, that is clearly the Emerald Kalama effect, which we are expecting as we have now the closing already done last week. We think we are able to already put some money into the system this year. The second is clearly the M&A project. On the one hand side, all the project which came to an end in Q2, like Theseo, Intace the divestiture of the leather business, and then in the third quarter, obviously, the closing of Kalama. As we all know and recognize, as markets are picking up globally when it comes to, let's say, operational markets, we see as well clearly a pickup in the M&A market.
That is as well an aspect which is driving the expectation on our side with regards to spending on exceptionals.
We have been in one, two further projects recently over the last few months that did not materialize, but we are in further projects going forward. Perhaps one or the other might materialize, but we are quite active in this regard. Therefore, we would take, of course, then always legal charges, bankers' charges, you name it, because we go into DDs in a professional way. We really turn around every stone so that we don't buy black cats in a dark basket, whatever the saying is.
Good. Thank you, guys.
You're most welcome, Matthew. I hope we will see you soon in person. We are all vaccinated here.
The next question is from Chetan Udeshi, JP Morgan. Mr. Udeshi, you can ask your question.
Yeah, apologies. I was on mute. Just one question from my side, which is, in second quarter, did the price increases that you guys put through, did that offset entirely the inflation in raw materials and logistics and energy, or do you have some catch up to be done on that regard in second half of this year?
Chetan, good to hear your voice. The mute thing is something I always have on my side as well, but this time I don't need to touch the button, so it has so far not happened. Your question is a very good one, and let me address it in the following way. Raws, by and large, we have in second quarter, you can see that 10% pricing. In Q1, we had basically 0% price increase. The 10% clearly show you that we have been extremely active. By and large, I would say we have nearly rolled all raws over. Some catch up here and there potentially still lagging, but majority-wise, we addressed it. Energy is still out there.
My assumption is energy is definitely more difficult because in many of our contracts, we have long-term contracts where energy prices are not included because normally we don't have these swings. This, from my point of view, will be a not only this year activity, it will take us most likely 12- 18 months to address contract by contract. If you have big underlying contracts, it simply takes longer and the discussions is not done from one day or one quarter to the other. The positive statement to you is raws, basically, nearly all addressed. Energy, we are working on it. Therefore, let's see how we advance in this regard. I hope that clarifies your questions, Chetan.
No, that does. If I follow up, of course, you've given a full year guidance, which is useful. Can you help us understand how we see Q3 at the moment? It seems, at least in the past, we've seen a bit of seasonality that Q3 is slightly lower than Q2, and then bigger seasonality in Q4. At this point, would you say there is any reason to believe it will be different than that in Q3 and Q4 just from a normal seasonality point of view?
Well, I don't think that we will see a summer dip. I think overall the world is still bringing things back in place, in order. We saw that Q3 last year, markets rebounded. The comparable basis, volume-wise at least, are better than Q2. We still see distortions in the system. We said as things are normalizing, we now provide guidance on full year and basically don't really see the necessity to slice quarter on quarter into pieces. By and large, we see a softer seasonality compared to the historic average. Of course, August always tends to be softer in some countries like Europe, Southern European countries. We will not have, I don't expect anywhere a sharp summer break because the business and industries are on the rebound still.
Very helpful. Thank you.
We always like to be helpful. All the best to you. Next question, please.
The next question is from Andreas Heine. Your line is now open.
Yes. A small number of straightforward questions, please. If I take these rubber chemicals out with, let's say, a margin of zero, I get in Specialty Additives to 18% in Q2, which is basically where you were in 2019. I think the ambition is 2020, you outlined that the high margin aerospace loops and oil and gas is not back. Is that coming back now next year? Is that something which would be on the agenda to lift the Specialty Additives margin, including the business from Emerald Kalama Chemical to this target of 20%? That's the first question. The second, the Currenta explosion, could you clarify whether in any way LANXESS might be affected by this in your operations? In the industrial and the Advanced Industrial Intermediates, you have produced also some products, which you have in Emerald Kalama Chemical.
Will the marketing of those products be now done from the CP segment, so led by Emerald Kalama Chemical, or will that be still separate? These were my questions.
Valid questions. I start with your first one. You're completely right. If you back out the numbers of the businesses that have been transferred into Additives, i.e. the rubber Additives, the business would be roundabout at 18% already, despite aviation still lingering and lowering diluting margins. Overall, you see that the division Additives rebounded nicely, and it should rebound further. At least this is our expectation next year.
The second point to this is, however, the rubber Additives will never be a 20% margin business, so this will clearly linger and dilute the underlying margin of this business, so this needs to be kept into perspective. Now to your third question, the K-FLEX products are margin-wise the lowest one in Emerald's. I don't think they will lead to an improvement in the margin.
They will be where the margin currently rather is in the area of 15, 16 percentage points. It will not be an incremental booster. The Consumer Protection products, they are the heavy hitters. The K-FLEX products are definitely below the average of Consumer Protection products. Now, the marketing to your last business question, the marketing will all be in one business unit. The F&F products that are currently embedded in the Intermediates division and the sales reps and marketeers, they will all join the new business units. Otherwise, we create complexity.
We clearly make management carve-outs products, a business carve-out completely, so that here really a champion is being created in the F&F space. It's a difference if you have 500 people, 500 pros on F&F compared to 1,000 pros on F&F with five assets worldwide positions than in just one region being positioned.
Here we clearly make a step change in terms of specialty supplier to the F&F industry globally. We see that all big accounts are with us. This is a unique setup, and therefore it will be a unique, strong, unified team led under one business structure, and let's see how they are going to accelerate in the years to come. This is basically my feedback on the business. You've addressed horrible accidents that really has emotionally hit everybody here.
Even though we are not directly impacted, you feel sorry. You feel condolences, which we expressed to the entire Currenta family on behalf of the boards, on behalf of the employees, our employees. These are so-called brothers and sisters. I think that is what weighs heavily. Financially, there will be something like EUR 5 million-EUR 10 million operationally losses. This is embedded in our guidance.
On everything that is higher than this, we have protection, financial protection through insurance, et cetera. This is just a side point. The big point is the accident itself and the shock to the environment and region. Now we need to work on it. Something like this simply may not occur. Full stop. Next question, please.
The next question is from Peter Spengler, DZ BANK. Your line is now open.
Good afternoon. Thank you for taking my questions. I have two questions left. First, in the view of the good volume demand this year, do you see a need for capacity expansions that you did not expect before? Maybe there is a segment or a division where this is now possible earlier. The second question is, do you expect an increase in administrative costs or bonuses this year due to the elimination of COVID measures? Thanks.
Very valid question, Spengler. Thank you. On capacities, the one thing that of course we would like to flag are, we are still in the process of working on battery chemistry. This is something where when we step in, we will step in, and that will need CapEx. Second, for Emerald, we clearly already flexed that here we do see opportunities on the bottlenecking the ultra-purified benzoates. This is something that we will engage in, because here the market is pretty tight. This is a super-duper growth area in beverage industry and biocides, you name it. We are short of capacity, so this is something we will definitely take on board because of the juiciness of the business plans that I've seen so far. It could be double-checked now we own the business.
This was one of the fundamental drivers for our business plan and the M&A analysis. We look at this quite positively. On your second question, definitely. This year we will pick up more SG&A costs, and one big driver for that is a bonus. Last year, the management board, among others, cut the bonus to 50% max. I hope, and I would be happy that the entire managerial grades worldwide will get a bonus 100% or above if we excel. That, of course, paying bonus is something that for the entire managerial grades worldwide is always a double-digit amount. If it's 50%, it's of course half of what you have when you have 100%. Therefore, this is something that will lead to an increase in the admin costs for sure. Second driver, but not as big as bonus, is traveling.
Our assumption is that now traveling will occur again in the second half, gradually increasing. At least we've communicated now since August, after discussion in the management board, that everybody who is double vaccinated is allowed to travel. Traveling is then not allowed. Vaccinated people can travel from now on, as long as borders are open. Of course, travel costs therefore will also increase going forward.
Thank you very much.
Most welcome. Next question, please.
The next question is from Jaideep Pandya On Field Research. Your line is now open.
Thank you. I just want to basically look at the cash flow that is in LANXESS today. I'm sorry, but I'm going to compare it to the old days, Mr. Zachert, when you were the CFO and rubber was in the company. The CapEx to sales those days was 7%, and these days it's also 7%. Then on top of that, you guys are spending, let's say about 1%-2% on exceptionals for the last couple of years. In principle, when we think about a 1.1 billion EBITDA range, by the time we deduct CapEx and exceptionals, we're left with $300 -$400 million in the bank. The question really is, what is the underlying CapEx, maintenance CapEx level of LANXESS today?
Are you spending a lot of money in projects which we haven't seen EBITDA for yet, where hopefully you will give us some longer-term EBITDA guidance or earnings guidance on November fifth, which will allow us to see the growth profile of LANXESS? Because obviously right now, there is a very frustrating circle where despite all the recovery, cash in the bank at the end of the year is, if I may use the term, disappointing. That's my first question.
The second question really is around your bromine business. Your Western peers have about 50% or so of longer-term contracts. So if you can just give us some color of what is the contract profile for LANXESS, and are longer-term prices adjusting every year and therefore the sharp rise in bromine prices that we've seen this year should be reflected really in the P&L next year?
Thanks a lot.
Well, let me just take note of your questions. Let me give you a high-level answer on cash, and if this suffices, fine. Otherwise, you can come back to it, and then Michael will pick up on the details. If I look at cash flow, if I look at operationally, of course, we saw last year the inflow through the implosion of prices. We had a strong inflow on net working capital. This year we would see the opposite, which the entire industry is facing. There's no change here. You would see also that our second half year cash flow is going to improve, so there is no change here. The two topics you have addressed was CapEx and exceptionals. Now, on CapEx, there are two elements that currently drag on CapEx and lead to the 6, 7 percentage points that you have mentioned.
The one relates to upgrade of plants. We bought and deliberately pointed out that the plants that we bought in the U.S. need to catch up on investments in order to reach the standards we have. This will by and large, still be something for 2022, and will then move downwards. This is one element on CapEx. Second element on CapEx, which we also state, is activation of software costs that we incur. We are running here big projects that will come to an end for the big countries next year.
That was adding to the CapEx envelope around about EUR 40 million, EUR 50 million. This is happening every 10 years when you upgrade SAP and the like. This is something that currently drags on CapEx, but automatically these two points will come down. Second, on exceptionals, I would clearly like to mention two points.
We are in a heavy portfolio management circle right now. You've seen projects, you have seen now in every year that we engage on big projects. Like rubber divestment in 2016, rubber divestment in 2018. These were big projects. On such projects alone, for bankers' fee, lawyers' fee, environmental tax, you pay on average for projects which are in the EUR billions. I mean, each rubber project was leading to EUR 1.2 billion, EUR 1.4 billion of cash on the account.
You have something like EUR 10 million that you expense. If you look into Currenta, you are in the double-digit EUR millions. If you look into Emerald, you're on double-digit EUR millions, et cetera. I think all of these M&A projects were taken positively by investors, because either we got proceeds, like on leather chemicals. We got good cash and the commodity business went out.
Everybody liked that, you need to pay for it. The portfolio change process is not over. Therefore we are doing the second. There are innovation projects that we have in exceptionals, like CheMondis. I think people like CheMondis, but it incurs costs in low double-digit millions. This is booked in exceptionals because CheMondis somewhat is an exceptional project. One day we will open up. If this continues to be on a successful path, we will open up.
When we open up, investors hopefully will see proceeds. If we don't consider this as a viable project, we will stop it, and then we will no longer pay EUR 10 million, EUR 15 million on a yearly basis. We will basically make sure that cash drain is reduced. From all of what we see right now, we think this is a viable project.
That should explain, I think the two questions on CapEx and exceptionals. As far as bromine contracts are concerned, the volatile markets definitely here is the Asian market, the Chinese market. China is on spots. As far as Europe and North America are concerned, you are normally on a contract basis, so most of the contracts here have a one to two year duration, and so whenever prices in general move up, which they currently do, you see a positive pricing impact then one, two years following the tightness of the markets. I think that answers both questions, Jaideep.
Thank you so much. Thank you.
You're most welcome.
The next question.
Next question, please.
The next question is from Mubashir Chaudhry. Citi, your line is now open.
Hi. Thank you for taking my questions. Just a couple of this, please. The results didn't really have an impact from the auto chip shortage in the second quarter. Are you seeing some sort of restocking from your customers? Should we expect more of an impact into third and fourth quarter? Coming back to the bromine comments. Are you seeing increased inquiries from your side, given one of your U.S. peers is having issues with their own bromine commitments? Is that leading to more volume queries on your side, or are you kind of solidly committed, and therefore we shouldn't expect a volume uplift? Thank you.
Very good questions. Thank you, Mubashir. Let me address one by one. As far as Q2 is concerned, I mean, look into the engineering materials division. The pricing volume was extremely strong, so we didn't see any impact on the difficult words. Chip shortage, I hope I pronounce that correctly. I discussed with a big CEO in the automotive industry on this feedback, pre-Q2 earnings call. The feedback I got there was, and he gave an example for the industry. The industry could have gone up higher. Basically, the industry went up in many of the regions by around about 10, 11, 12 percentage points. This could have been 3 percentage points higher. Anyhow, 10%, 12% is strong growth. Of course, on a modest basis, but in Q3 and for the full year.
If they continue growing double digits, their growth could be even more pronounced. The rebound in the automotive industry, however, is stronger than the decline or the shortage of the semiconductor industry. We currently don't see that in our order book. We still see that the automotive industry tries to stock up, but they can't, because we cannot produce as much as they want. We also see now that the polymers for, or the polyamides are kicking in for e-mobility. We always said that e-mobility eats or longs for more specialized polyamides, which we have prepared. Therefore, we now see a strong pull from the electromobility industry for our products called Pocan. This is a PBT product. Also for our polyamides.
As far as Q3 is concerned, we see a strong volume coming from the automotive industry and not a reduction due to shortage of semiconductor chips. On bromine, second question. I mean, we could sell more, our bromine wells, as you know, are in El Dorado, in Arkansas. First of all, what you have to do is you have to have trucks to ship. Truckers, truck drivers are a rare species in the U.S. You need to have more truckers. We find them, not enough. Once you've found truckers, you need to get ship containers. Also, this is a rare species in the harbors. Therefore, anybody who has a shortage on chlorine, whatever, we could sell more, but we need to find truckers and ships to export the products which are scarce at this point in time.
I hope this answers both questions. You're most welcome.
The next question is from Geoff Haire, UBS. Your line is now open.
Good afternoon. It's Geoff Haire from UBS. Just wondering if I could ask two quick questions. First of all, would you be able to give us what the exceptional costs will be for Emerald, please? Also, you mentioned in the statement that you had new long-term contracts in Saltigo. What does that translate to in terms of numbers?
Hi, Geoff. I will take Saltigo, Mike will take your Emerald question. If you look at We brought it into the comments of our quarter leads, just in order to explain the price effect in CP, in Consumer Protection. This basically relates solely to Saltigo. In Saltigo, we have with some of the big customers, agreements on contracts, normally long-term. One long-term contract came to, let's say, an end and was renegotiated.
Here, we make the agreements, in this particular case, that we take ownership of the entire value chain for the managing of raw materials, et cetera. Normally, what you have in these contracts often is the big customers provide certain intermediates to you, which you further go and synthesize, because we only make the high-value synthetic steps. This particular contract, the customer agreed to, we can also take care of the precursors.
Which we like to do, because we saw opportunities here to improve the pricing. Bottom line, therefore, means prices for the product were adjusted. This margin-wise is a positive for us, and volume-wise, we get more volume. Bottom line, financially, this is clearly now turning into a long-term contract, which is more accretive to the P&L than before. You see a negative pricing effect, which we try to explain so that nobody needs to bother. That's behind us. I will not give now numerical details because this is business intelligence, but I think it explains the question in fully fledged to you, and Michael will address Emerald.
Hi, Geoff. For this year, we expect the exceptionals in the ballpark of roughly EUR 15 million. The same number holds true for upgrading the assets, like Matthias said. The synergies should sum up to around EUR 5 million. That is for 2021. For the next 2 years, we expect the further exceptionals, CapEx, and of course synergies. They will sum up to, in total, some EUR 25 million on synergies, EUR 35 million on exceptionals, and EUR 55 million on CapEx. We provide a split over the next years in the slide deck in the backup.
Thank you.
You're welcome.
Next question.
The next question is from Rikin Patel, Exane BNP. Your line is now open.
Hi. Thanks for taking my questions. I've just got two left. Firstly, on Emerald. You've mentioned the 22%-25% margin target. Can you just give us some color on what profitability will look like this year? Any comments on organic growth in F&F would also be helpful. Secondly, you mentioned CheMondis earlier, just any updates on how the monetization models are progressing, and how your customer rollout has progressed as well in the last quarter would be helpful. Thanks.
Rikin, thanks for participating today and for your questions. The 22%-25% is of course the margin guidance. For this year, the incremental EBITDA stemming from Emerald in euros, and based on our current understanding, we now need to do the technical stuff with converting from US GAAP into IFRS. We've done that high level-wise, but it needs to be, of course, made 100% clear. We need to look into how they report cost-wise, category-wise, and bring that into our own accounting standards, reporting guidelines. These are rough numbers. Michael will give a more precise update on Emerald numbers latest with Q3. On the basis of our knowledge today, the incremental EBITDA stemming from Emerald for the remainder of the year is EUR 35 million. Of course, going forward, we are not going to report business unit numbers.
We will always keep them on divisional level. I think this is standard in the industry. As far as monetization CheMondis is concerned, we are still out here and testing. The difficulty that we currently have on platforms, not only ours, but also other platforms. You've seen that last year in times of pandemic, platforms we saw around the globe that traffic on platforms just exploded, because everybody went digital. The opposite is happening, not on the customer side so much, but on the supplier side, because, as you know, as we report, as everybody reports in chemicals, products are short. What people are doing right now is that suppliers rather sell to their A and B customers.
Platforms are basically another outlet. As you are here, rather trying to find outlets for your incremental volumes that you cannot get into other channels, you currently lack the supplier offering. Therefore, the platform currently CheMondis has not a reduction in buyers. Buyers are still extremely active on the platform. The offering of the suppliers in the last three months has reduced by 30, 40, up to even 50 percentage points. We need to basically wait until the suppliers come back on the platform. The time will come. Then, of course, we would see here that the matching to orders will go up again. Therefore, the monetization that we brought onto the platform, we now need to change gears and work on bringing, first of all, suppliers back on the platform, which will take some time, and then we will test the monetization again.
This is where we stand on CheMondis. I hope that clarifies everything.
Thanks.
You are welcome. Next question, please.
We have no further questions. I would like to hand back for some closing remarks.
Hey. Hopefully we've answered all questions. Michael and myself, we would like to thank you for your attention, for your time and your interests, and we will, of course, be on roadshow now in a digital or physical way. At least Oliver and Michael are now going physically on the roads. I will be digital-wise on the roads and hopefully physically then in the months to come. I wish you all the best. Have a good summertime and stay healthy until the next call. Thank you from LANXESS in Cologne. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.